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Monday, December 24, 2007

Energy security and limits to growth?

As the China and India led developing world (5/6th of humanity) joins the energy intensive development bandwagon, the newly released World Energy Outlook has many insightful observations. Martin Wolf lists out a few of them in his FT column.

1. If governments stick with current policies (which the IEA calls the “reference scenario”), the world’s energy needs will be more than 50 per cent higher in 2030 than today, with developing countries accounting for 74 per cent, and China and India alone for 45 per cent, of the growth in demand.

2. This huge increase in overall demand occurs even though energy intensity of gross world product falls at a rate of 1.8 per cent a year.

3. Fossil fuels are forecast to account for 84 per cent of the increase in global energy consumption between 2005 and 2030.

4. World oil resources are, insists the IEA, sufficient to meet demand at prices close to $60 a barrel (in 2006 dollars). But the share of world supply coming from members of the Organisation of the Petroleum Exporting Countries will rise from 42 per cent to 52 per cent. Moreover, “a supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices cannot be ruled out”.

5. Coal’s share in global commercial energy is forecast to rise from 25 per cent to 28 per cent between 2005 and 2030, because of its role in power generation. China and India already account for 45 per cent of world coal use and drive over four-fifths of the increase under the “reference scenario”.

6. Some $22,000bn (a little under half of 2006 world gross product) will need to be invested in supply infrastructure, to meet demand over the next quarter century.

7. Even with radical measures to reduce the energy intensity of growth under the “alternative policy scenario”, global primary energy demand would grow at 1.3 per cent a year, only 0.5 percentage points a year less than in the “reference scenario”.

8. China will become the world’s largest energy consumer, ahead of the US, shortly after 2010.

9. Under the reference scenario, emissions of carbon dioxide will jump by 57 per cent between 2005 and 2030. The US, China, Russia and India alone contribute two-thirds of this increase. China becomes the world’s biggest emitter this year and India the third largest by 2015.

10. Even under the IEA’s more radical “alternative policy scenario” CO2 emissions stabilise only by 2025 and remain almost 30 per cent above 2005 levels.

More than any other challenge, energy related problems pose the biggest risks for human survival. The global warming and related climate change problem is directly dependent on our energy consumption, and it is difficult to see how it can be controlled without significantly cutting down on energy production. This is made difficult by the direct link between economic growth and energy consumption.

Martin Wolf argues that the world which moved from a zero-sum imperialist economy to a positive sum one (in which every one benefits politically and economically, and in which people and countries trade to improve their lot), is now again threatening to slip back to a zero-sum one. He writes, "The biggest point about debates on climate change and energy supply is that they bring back the question of limits. If, for example, the entire planet emitted CO2 at the rate the US does today, global emissions would be almost five times greater. The same, roughly speaking, is true of energy use per head. This is why climate change and energy security are such geopolitically significant issues. For if there are limits to emissions, there may also be limits to growth. But if there are indeed limits to growth, the political underpinnings of our world fall apart. Intense distributional conflicts must then re-emerge – indeed, they are already emerging – within and among countries."

Update
Geography Professor Jared Diamond has a delightful article in the NYT, where he makes a strong case for a convergence in living standards, as the only solution to the massive consumption challenge facing the planet.

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